Update-2 4/9…Another weak day for biotech, looks like S&P 500 and Tech are the place to be. Tougher FDA and Drug pricing legislation weighing on sector?
- ARKG down 1.06%, IBB down 0.44% to $148.73, XBI down 2.22% to $129.63, IWM flat at $222.59.
- XLV up 1.10% to $117.95, UNH up 3.13% to $376.30. large caps firming up: ABBV, PFE, RHHBY, VRTX.
- Vaccines trending up : BNTX, MRNA, NVAX.
- Sea of red in gene therapy stocks.
Update-1 4/8/ 255p…Trades for Today-smaller caps perking up. XBI holding 131 handle. NAZ strong.
- Added to GKOS (upgraded) and TDOC (rally)
- Medtech looking better (XHE).
- HOLX flattish on 795M molecular Dx acquisition
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Bear Tracks in Biotech, What’s Going On?
- Traders have moved on to other sectors like “reopening” plays.
- We have a better understanding of Coronavirus stocks.
- Need Q1 earnings guidance and catalysts to take us out of bear tracks,
As I reviewed my recent posts over the past weeks you can see the bear tracks. On March 14 we wrote “Healthcare Stocks are Fading”. And on March 3 we wrote,”Speculative Appetite is Sinking in Biotech with Latest Rotation”. The XBI equal weighted in biotechs and holds many speculative small caps. As we have said many times it is the bellwether of biotech strength and momentum. Since early February the XBI has plummeted from a top of $174 to the current level of $135 just above a slight bounce at the $130 low. We accepted the heroics of biotech breakthroughs in vaccines and diagnostics but now investors are moving on to the”reopening” economy or the higher beta tech names.
Lets take a brief survey of healthcare and biotech stocks and survey the damage. It is hard to put biotech in perspective when many other sectors are at new highs for 2021: financial, transportation, semiconductors even oil services.
The IBB shows a similar chart as the XBI though not as severe The peak was $173 on February 10, followed by a vicious sell-off on February 16 and now at the $150 handle, after a brief mid-March rally.
Note that the Healthcare Select SPDR Fund (XLV) at $116 is still in an uptrend at $116 bolstered by UNH at $364 up almost 4% YTD.
Large Cap Biopharma Stocks Still Offer Growth with Dividend Value
Large cap leaders: ABBV, AMGN, BMY, LLY, PFE; laggards: MRK, REGN, RHHBY, VRTX. The IBB is down 1.13% YTD.
Here is our last review of Large Cap Biopharma on February 15 when they first “stalled”. The leaders YTD at that time were: ALXN (acquired by AZN), AMGN, BIIB, GILD but te IBB was up 12.7%, definitely more bullish times.
As I mentioned in earlier posts there wee a few downgrades among the large caps an mid caps in mid February. Also in the background is the political risk of drug pricing legislation.
Molecular Diagnostic Stocks are Volatile but Still Tradeable Because of COVID and Breakthroughs in Genomics
Many of these molecular tools and diagnostics stocks were high fliers and are still overvalued But the larger cap plays that we first covered years ago are still core positions: DHR, ILMN and TMO. And our best hit of 2020 was Genmark Diagnostics acquired by Roche, ARKG was the hot trade but it is down 5.5% YTD. Funding in this sector is readily available and most of the genomics news is covered in www.genomeweb.com. Genomics Conferences are coming up in May and should provide catalysts for the stocks.The ACMG is next week.
Gene Therapy Stocks Have Cooled Down
Watch this space for future movers. Our favorites are : CRSP, DRNA, EDIT, NTLA. Nothing to do now.
Summary:
1. Traders have moved on to “reopening” and technology stocks.
2. Large cap Biopharma are more defensive stocks as we await Q1 earnings and guidance.
3. We will update our healthcare Portfolio at the end of the week and core tracking is UNH and XLV.
4. Coronavirus stocks outperforming over 52 weeks: Abbott Labs (ABT), BioNTech (BNTX), Genmark (GNMK), Hologic (HOLX) and Moderna (MRNA). Many of these stocks like Quidel (QDEL) were too frothy at midyear because of outstanding financial results
5. Technicals matter Take a look at this Elliot Wave of biotech sector to see the bearish pattern.
